Back in the ‘good ole days’ (which usually tend to have occurred exactly one hundred years before the phrase is uttered), doing business in America was simple. Entrepreneurs completed deals using only back of the envelope calculations and a firm handshake. They didn’t need any of those Wall Street wizards with their fancy forecasting and analysis methods. Big Government wasn’t looking over your shoulder or strangling you with red tape. You didn’t need a fancy college degree to make something of yourself. All you needed to achieve wealth were willingness to work hard and a spark of inventiveness.

A profile of the typical millionaire in the United States seems to confirm this narrative. Most millionaires, according to the seminal book, The Millionaire Next Door, didn’t make their money in some highly complex business. In fact, it was usually some ordinary business – say construction or dry cleaning – that vaulted them into the ranks of the wealthy. Although fairly educated – almost 80% have a college education – education was not the distinguishing factor that accounted for their wealth. Nor was it above average performance in the marketplace, inheritance, or even the type of profession they occupied. The single biggest factor among them was their propensity to save.

Wealthy people, on average, save a far higher percentage of their income than their non-wealthy counterparts. Some would argue that of course the wealthy save more, because they do not need as much of their income to cover living expenses as ordinary people. But the data refute this. The propensity to save is a precondition, not a result of wealth. On the other hand, in some professions which demand a higher ‘appearance’ of status – say doctors or lawyers – people tend to live at or above their means. They save a relatively small amount of their income, and have fewer investments in stock, real estate and other productive assets.

Although highly educated and respected in their fields, they are also some of the most highly leveraged in terms of debt. Interestingly, their education seems to play a part in their failure to accumulate wealth. By delaying their entry into the work force through long educational careers, and accumulating consumption-related debt, many of today’s professionals start out in a hole that they never – despite their high intelligence – seem to dig themselves out of. It is telling – and a bit shocking – that even President Clinton (one of the most successful politicians in modern history) – says he did not have a cent to his name before he left the White House after two terms as President. How could this be? Here you have a family with two Yale law degrees and a Rhodes scholarship between them, years of working in Government and private practice – and they could not accumulate any wealth?

It is not uncommon to meet these types – the highly pedigreed professionals who, at mid-life resign themselves to dying with their student loans outstanding. While it is common for ex-Presidents to give speeches and receive honoraria, the Clintons seem to have created a cottage industry out of paid media appearances and book advances. In the respect, they are somewhat reminiscent of the aging baseball stars who earn a living by signing autographs and memorabilia at trade shows. Trading one’s popularity as a sports star however, seems slightly less degrading than spending ones’ post-White House years as a permanent campaigner. But when you’ve got your student loans and your children’s student loans to pay, what are you going to do?

Paradoxically, those self-made millionaires that earned their wealth over a lifetime of work and savings – tend to want something different for their children. The parents of an immigrant Indian family that saved enough from working at a 7-Eleven to eventually acquire their own franchise do not want their children to follow in the family business. They want their kids to get an elite education and become doctors and lawyers. In a sense, these are not strictly economic aspirations – they are status symbols. Education, like fancy cars, homes, and jewelry is not always an investment. Sometimes it’s a form of consumption.

What’s the difference? The true test of whether an education is an investment or merely a form of conspicuous consumption is whether the degree or skills one learns is likely to increase one’s earning ability by more than the (time and monetary) cost of the education. This seems like a simple process to gauge – much like a back of the envelope computation – but it is something that many college graduates fail to clearly consider before incurring huge debts and spending years collecting degrees. While college graduates earn on average more than non-graduates, they tend to enter the work force later with more debt. This is especially the case with people that spend on ‘name brand’ educations. It is increasingly clear that there is a disconnection between the price and the value of higher education.

It’s obvious by now that the latest collapse of the U.S. stock market and the ensuing recession was spearheaded by experts – those same people who received fancy degrees from Ivy League institutions. They sold the public on their complex mathematical models purporting to show huge profits – all the while masking the risk of a total blow up. In many respects, this is the societal effect of a miseducated population. It is the result of an over-reliance by many people on the advice of experts, and the reliance of those experts on theoretical constructs that have little bearing on the real world. It is a classic case of mistaking the map for the territory. Popular writer and educator Nassim Taleb, when describing the cause of the market collapse, was blunter. He aptly describes it as a case of “scholarship without erudition.”

Taleb’s argument is simple yet nuanced. By concentrating for a long time on complex problems, experts tend to become experts in solving known problems -- such as the probability of winning a casino game (where all of the possibilities are known). But this tunnel view prevents them from considering the broader factors that account for real world events in which there is no complete information – be it business performance, the stock market, or the riskiness of complex financial derivatives. In part, it is the level of education that deludes them into believing that they can manage the complexity of making large bets for small gains.

Under conditions of uncertainty that entrepreneurs confront in real word business situations – tunneling (or focusing on known problems) – is far less effective than remaining open and widening one’s perspective. Remaining open requires the ability to suspend belief about what’s happening, to get out of the textbook and into the decision under imperfect information. This type of perspective is becoming a lost art in today’s world of hyper-specialized experts.